Tesco mark up stock by 113%, then pay a million for it

While it's difficult to determine whether the Daily Mail is a newspaper or a creative writing project, there's the occasional story that takes our fancy. Today the paper reports that the accounts department at Tesco stuffed up recently, with regards to a small order of bikes from Universal Cycles, a subsidiary of Sports Direct. In case you're not a football fan, Sports Direct is owned by Mike Ashley - the man who's made a sow's ear out of Newcastle United and lost millions in doing so.

The Mail states that Tesco should have paid £984 for six Muddy Fox suspension bikes but handed over £984,000 instead. According to anonymous sources/imaginary pixies, Universal Cycles "has paid back £863,000 but Tesco claims it is holding on to more than £121,000 in outstanding funds". The error in payment was seemingly made in August, and now the supermarket are taking the company to court to recoup the rest, plus lost interest.

Quite why Tesco would only order six bikes at a time in the run up to Christmas is something of a mystery - surely they're going to fly out the stores? But if the story is credible, then Tesco themselves are having plenty of fun with the numbers too, as one comment points out:

"£984 for 6 bikes, that is £164 per bike... I wonder how much Tesco actually charge per bike?! Oh wait, just checked their website! Normal price: £350, now on 'special' at £250! Somehow can't find any sympathy for them!!!

By our admittedly shaky maths, that would mean Tesco has been marking up the bikes by 113 per cent when not on offer, and is still marking them up 52 per cent while they're doing you a favour. Every little helps, eh?

38 comments

Shocker!!! Company pays less to its suppliers than it charges to sell same item...
It is not like they have other overheads to cover and God forbid; make a profit on a sale...
It is not a particularly excessive mark up TBH

Have I gatecrashed the Tesco christmas party here? You're right nobody is forced to shop there, but they probably don't know Tesco is charging nearly £200 more for a product that cost them £164. Of course they'll mark up the price, they're a business, but when all they do is bleat on about how they put the customer first, that's obscene. If it was £450 or £550 would you bunch of apologists still be defending it? It is a free market, but let's stop pretending they're doing us a favour with margins like that.

Well it seems as though tht ebikes pictured by the Daily Mail and the Tesco website are different, so firstly how are you sure that the bikes on their websites are the ones they bought six of? Ridiculous assumption. Also, if they are the bikes as published in the Daily Mail, Muddy Fox are selling them direct for £299. Yes I agree if Tesco were charging extortionate rates compared to other retailers then people would have a right to be angry. However, they don't seem to be, so stop trying to make a huge deal out of it. Shocking article to be honest.

@ Nibbles - FFS they are a business and its a free market, they can charge what they like.
If you don't like their prices then don't shop there. Do you complain when they sell things at less than cost price to entice you into the store - thought not....
Where does it all end - do Starbucks have to ask your permission to charge £4 for a coffee that probably costs 40p to make?

as we all know from reading both Bitterwallet and HDUK every day:
SHOPS SHOULD NEVER BE ALLOWED TO MAKE PROFITS.
Everything should have a lifetime warranty and be sold at cost price, but sales people should be a walking encyclopedia of knowledge on every single product sold, even if not sold by the company they work for.
there also should be no other stores than John Lewis, as this is where God shops.

Most Tesco stores are in prime retail locations that come with large overheads. Within their own stores there will competition for shelf space. Each square foot will have to generate a certain amount of profit in order to keep the store profitable. With the space a bike takes up in both shelf space and storage they would need considerable mark-up on it to compete with smaller products that are purchased more frequently.
I have nothing to do with Tesco. I don't even shop there, as there isn't one nearby. But I don't think that kind of mark-up is surprising. Just because it is a margin does not mean it is a profit margin.

Don't be angry, Charlie. And don't "shocked" either - we couldn't have suspended a bigger caveat above the story if we'd used stepladders.
The Mail seemed to have used a generic still from Universal Cycles, which may or may not be the cycle in question. But then Tesco only sell one type of Muddy Fox cycle - the one we pictured above. *If* the story is correct, then that suggests the maths is correct too. Far from being a ridiculous assumption, it seems a quite reasonable one.
This isn't about what other retailers sell the product for - the point is that Tesco spend millions on selling a brand that wants consumers to believe they're getting value for money - how can they justify a strapline such as "every little helps" when they charge charge £200 more than they paid? Most people perceive Tesco to charge fair prices, but a £200 mark-up doesn't come close to justifying the costs involved in selling it, even when allowing for a generous profit. 20 of those shitty little toasters they sell for a fiver take up more room than a cycle, and invariably take more effort to stock and sell, and make way less profit. Clearly Tesco can charge what they like, but margins like this make a mockery of their value-for-money proposition.
Tesco are making an enormous fat profit which is great for business, but what with this being a consumer site and all, let's not pretend it's acceptable for a supermarket to act as if they can do no wrong while taking the customer's eyes out.
Curiously, Tesco have pulled the cycle from sale in the past half hour - it's now "discontinued"
http://www.bitterwallet.com/wp-content/uploads/2009/11/Picture-24.png:

The fact is that a consumer will choose what to pay for a product, hopefully after some research. A company as big as Tescos will be able to negotiate a substantial discount on the cost price, they can they either sell at the RRP or offer a promotion. If Tesco had ever been about saving people money, how would they be raking in the cagillions of pounds profit they do every five minutes.
There are so many reasons I hate Tescos but marking up products is not one of them.

"If Tesco had ever been about saving people money, how would they be raking in the cagillions of pounds profit they do every five minutes."
James, that doesn't make sense - it's perfectly possible to save people money, by been less greedy in terms of profit per sale, and make more profit overall on volume.
And you're dead right, consumers will choose what to pay for a product. But how many do research, and many think: "Tesco - that's the supermarket that saves me money, so I'll buy from them." That's the point - now Tesco are in the position they're in, with the reputation they have - do they have to offer the consumer value for money?

>100% profit on certain lines is the norm, as theres a whole load of extra costs to fit in, and the price will largely be pitched against other retailers, which, as stated Tesco are cheaper than
What a shocking bit of non-news this is

what a oke this site is majority of time.
they need to make profitdont forget all the money involved between buying it,like shipping, and staffing costs lol,
YOU IDIOT!!!!!!!!!!!!!!!!!
look at stores like DIY stores and plant stores,the markup of what 3000% on some items.
£250 is a bloody good price

Paul it makes perfect sense. It clarifies that Tesco, despite their strapline, have no interest in offering any of us a good deal or saving us money. They simply want to make as much profit as they can at our expense.

@Paul Smith
"James, that doesn’t make sense – it’s perfectly possible to save people money, by been less greedy in terms of profit per sale, and make more profit overall on volume."
Wow. Remind me to never ever under any circumstances hire you to work in my sales offices.
People vote with their wallets. If it's too pricey, then people don't usually pay. If they do pay, then happy days. Well done Tesco.

Dave - The £164 would surely have included VAT too, so that price would actually be less than that listed?
Don't get me wrong, I think that it is a fair mark up and justifiable re head office costs and the mryiad of other overheads that will be incurred
If Muddyfox, the manufacturers charge more then that is much worse. In Retail every company inflates prices to reduce them later. It is common practice and to the punter, it seems as though they are getting a bargain....wow !! £100 off, lets buy it. In reality they may have only saved £10, but that is not as eyecatching as £100 off, irrespective of whether the original price was appropriate or not. Just the way we perceive bargains or stitch ups.

@ Mark Carpark
"“James, that doesn’t make sense – it’s perfectly possible to save people money, by been less greedy in terms of profit per sale, and make more profit overall on volume.”
Wow. Remind me to never ever under any circumstances hire you to work in my sales offices.""
I'm sorry but I'm not sure what kind of "sales" you're involved in but low profit margins on volume sales is standard business practice in all areas of retailing. It does the job of of enticing customers in as well as attracting larger discounts from manufacturers by virtue of increased volume purchases. Really pretty straightforward actually.
Other industries offer different levels of margins on their sales also. When I was a chef in Glasgow I usually operated on roughly 65-70% gross profit. However this was averaged out over my product line so, for instance one particular soup (tomato and basil) cost me just 4p (yes 4p!) a portion to manufacture and sold on for £1.75 with a mini baguette which actually cost me more than the soup! However this allowed me to offer my steaks with sauce at a much lower margin. Still yielding a profit, but a much smaller percentage. This meant that overall, pricewise, my menu was well balanced as far as the customers were concerned and the kept coming back which, after all is what business is about. Oh, and yes, I sold gallons of my soup!

@raptorcigs - There (sic) bubble will probably pop on day (wtf), but probably not before your caps lock key does. Retard.
Anyway, just wanted to say, what a shitty piece of reporting. Just pointing out that you're mocking them for ordering 6 bikes 'on the run up to christmas', yet you've obviously not even read your own trash, as the article says that the money has been owed since August.
August is, contrary to what the marketing people tell us these days, NOT on the run up to Christmas.

What annoys me about Tesco is they like to double the price of things (such as tins of Quality street) to £10 and then claim they're selling them half price for £5. I've seen them doing the same with other items. Surely this practise isn't legal? It's misleading to customers and just trying to rip people off who don't know what items normally sell for.

@Geepee
Your argument is severely flawed and your 'example' even more so. Simply put, if people will buy something for a price, then that price is valid. That is the market. Your Glaswegian greasy spoon operated on razor sharp margins because that's what the market will stand and you needed people to come back. Tescos obviously can and had sold those bikes for that amount of money, and who knows, maybe the people will buy another one?
In my sales offices we monitor all prices because if we offer the prices too low then we destroy the market. Too high, and we will go bankrupt. I don't see Tescos bankrupt, do you?

@Paul Smith
Hehe, sales isnt for most. The hardest job for the worst pay for most, the easiest job with the best pay for others. Btw, at all my offices there is free filter coffee and free coke machines. But only for closers...:-)

Christ! free coke machines! now that is something quite special. After a successful morning of sales the idea of having to rack up my own lines and even worse, pay for them, depresses me enormously. I knew there were better perks out there somewhere.

Sales is never the best pay, for anyone, ever. Only a sales monkey would think otherwise.
It's a shit job for little money for everyone. Barely one step above telemarketing.
Free coffee? wow! I'm signing up for my free cup of zapatista coffee.

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